Unlocking the Power of Series LLCs: Tailoring Business Formation to Your Needs

April 1, 2024
Jennifer Nichols

Limited liability companies (LLCs) are one of the most common corporate structures for good reasons—they shield the owners of the business from personal liability, provide pass-through taxation, are easy to establish, and offer considerable flexibility. However, there are options beyond the basic LLC structure. If you own a business with multiple properties or are considering starting a new business that will own multiple properties, a series LLC can provide significant benefits. J Nichols Law, PLLC helps business owners find the corporate structure best suited to their goals.

Series LLCs Explained

A series LLC is a limited liability company structure allowing separate businesses to operate under a single LLC umbrella. A “parent” LLC with various sub-LLCs or “series” stems from it. The series can have its own members or the same members as the parent LLC, but each series has its own assets and liabilities. Each of the series operates independently of each other, and each series is free from liability for the others.  This is beneficial in that the assets owned by one series are not subject to the liabilities of another series.  If a creditor has a judgment against one series, the judgment can only be collected out of the assets of that series.

Series LLCs vs. Traditional LLCs

In a traditional LLC, the LLC will be liable for every obligation of the business regardless of whether or not it was incurred as part of its original business operations. This can stifle investment, innovation, and growth, as LLC owners may be reluctant to put their entire operation at risk to invest in new opportunities.

The series LLC allows the LLC to create a series to protect the original business and to protect each series from liability associated with another series. For example, let’s say a home builder decides to invest in developing a new piece of property. They can create a series to purchase and own the new piece of property. In the event that the development fails, creditors can only pursue claims against the series and not the parent company or any of the other series.  If the development were held in a traditional LLC that owned other assets, the creditors could pursue collection of its claims from all of the assets owned by the LLC.

Why Not Create a Separate LLC?

Creating a separate LLC is always an option. However, creating a separate LLC requires additional costs and resources. Creating a new LLC means creating an entirely new entity where you will need to file a separate tax return, pay separate filing and registration fees, and generally maintain a separate business.

A series LLC allows you to share many of these tasks and expenses with the parent LLC. As a result, you are able to invest in and operate many different properties in a more streamlined and cost-effective fashion. However, series LLCs are not necessarily for everyone. An experienced business formation attorney can discuss whether a series LLC makes sense for you and help you structure a corporate entity that best suits your business needs.

Interested in Creating a Series LLC? Contact J Nichols Law, PLLC Today

Getting the right corporate structure in place is vital to your business’s success. At J Nichols Law, we understand business owners’ challenges because we’re business owners. To discuss your options and how we can help, contact us today at 409-257-7878 to schedule a consultation.